THE  PAPER  MONEYS 
OF  EUROPE 

THEIR  MORAL  AND  ECONOMIC 
SIGNIFICANCE 


THE  PAPER  MONEYS 
OF  EUROPE 

THEIR  MORAL  AND  ECONOMIC 
SIGNIFICANCE 

BY 
FRANCIS  W.  HIRST 


BOSTON  AND  NEW  YORK 

HOUGHTON  MIFFLIN  COMPANY 

Cfje  fctbcmbe  $ress  Cam&tUige 
1922 


COPYRIGHT,  IQ22,  BY  THE  REGENTS  OF  THE 
UNIVERSITY  OF  CALIFORNIA 


ALL  RIGHTS  RESERVED 


JDrcsss 

CAMBRIDGE  .  MASSACHUSETTS 
PRINTED  IN  THE  U.S.A. 


58515 


BARBARA  WEINSTOCK 

LECTURES  ON  THE  MORALS 

OF  TRADE 

This  series  will  contain  essays  by 
representative  scholars  and  men  of 
affairs  dealing  with  the  various  phases 
of  the  moral  law  in  its  bearing  on 
business  life  under  the  new  economic 
order,  first  delivered  at  the  University 
of  California  on  the  Weinstock  founda- 
tion. 


THE   PAPER  MONEYS 

OF  EUROPE 

•   • 
• 

THEIR  MORAL  AND  ECONOMIC 
SIGNIFICANCE 

NO  more  severe  reflection  could  be 
passed  upon  the  moral  and  politi- 
cal capacity  of  the  human  species  than 
this:  Five  thousand  years  after  the  in- 
vention of  writing,  three  thousand  after 
the  invention  of  money,  and  (nearly)  five 
hundred  since  the  invention  of  printing, 
governments  all  over  the  world  are  em- 
ploying the  third  invention  for  the  pur- 
pose of  debasing  the  second ;  thereby  rob- 
bing millions  of  innocent  individuals  of 


2  THE  PAPER  MONEYS 

their  property  on  a  scale  so  extensive  that 
previous  public  confiscations  of  private 
property  through  the  adulteration  of 
money  —  in  ancient  Rome,  in  Ireland 
under  James  the  Second,  in  Prussia  dur- 
ing the  Seven  Years'  War,  in  the  Amer- 
ican colonies  and  the  United  States,  in 
Portugal,  in  Greece,  in  various  republics 
of  Central  and  South  America,  even  the 
assignats  of  the  French  Revolution  — 
seem  pigmy  frauds  in  comparison  with 
the  present  vast  inundation  of  counterfeit 
paper  money. 

In  these  times,  when  so  much  atten- 
tion is  given  to  what  I  may  call  the  pre- 
historic history  of  mankind,  it  would  ill 
become  me,  a  mere  adventurer  in  anthro- 
pology, to  discuss  the  origin  of  money  or 


OF  EUROPE  3 

to  attempt  an  explanation  of  the  curious 
fact  that  the  art  of  coining  money  was 
invented  and  perfected  a  thousand  years 
before  the  art  of  printing.  The  coins 
struck  by  the  best  cities  of  ancient  Greece 
are  a  model  and  a  reproach  to  our  mod- 
ern mints;  and  being  for  the  most  part  of 
good  silver,  they  fulfilled  the  two  main 
functions  of  currency  —  as  a  measure  of 
value  and  a  medium  of  exchange. 

Silver  was  well  adapted  for  the  pur- 
poses of  currency  by  its  ductility,  dura- 
bility, divisibility,  portability,  and  value. 
Its  value  depended  on  three  things.  In 
the  first  place,  it  was  scarce;  in  the  sec- 
ond, it  was  much  in  demand  for  the  arts 
and  manufactures;  and  in  the  third  place, 
its  intrinsic  value  was  increased  and  sta- 


4  THE  PAPER  MONEYS 

bilized  by  the  needs  and  demands  of  the 
mints. 

Gold  had  similar  qualifications,  but  it 
was  too  scarce  and  too  precious  until  the 
nineteenth  century,  in  the  course  of 
which  (for  reasons  which  I  need  not  enter 
upon  here),  most  of  the  great  commer- 
cial nations  adopted  a  gold  standard. 
Copper  possessed  in  a  less  degree  the 
qualifications  of  gold  and  silver,  but  it 
was  the  first  metal  to  be  coined  into 
money  in  ancient  Rome.  The  Roman  as 
or  pondo  weighed  a  Roman  pound  of  good 
copper,  therefore  possessed  the  two  prin- 
cipal attributes  of  good  money,  a  definite 
weight  and  a  definite  fineness.  It  was 
divided  like  our  troy  pound  into  twelve 
ounces  of  good  copper. 


OF  EUROPE  5 

The  English  Troyes  or  Troy  pound 
was  first  used  in  the  English  mint  in  the 
time  of  Henry  the  Eighth.  Edward  the 
First's  pound  sterling  was  a  Tower  pound 
of  silver  of  a  definite  fineness.  Charle- 
magne's livre  was  a  Troyes x  pound  of  sil- 
ver of  definite  fineness.  The  old  English 
Scotch  pence  or  pennies  contained  orig- 
inally a  real  pennyweight  of  silver,  one 
twentieth  of  an  ounce  and  one  two  hun- 
dred and  fortieth  of  a  pound.  The  fa- 
mous pre-war  English  sovereign,  now 
demonetized  and  misrepresented  by  the 
depreciated  paper  pound,  was  itself  also 

1  "The  Fair  of  Troyes  in  Champaign  was  at  that  time 
frequented  by  all  the  nations  of  Europe,  and  the  weights  and 
measures  of  so  famous  a  market  were  generally  known  and 
esteemed."  (Adam  Smith,  Wealtb  of  Nations,  Book  I, 
chap,  iv.) 


6  THE  PAPER  MONEYS 

a  weight;  but  the  twenty  shillings  and 
two  hundred  and  forty  pence  which  ex- 
changed for  it  were  token  coins  depend- 
ing for  their  value  upon  the  gold  sover- 
eign. 

From  the  time  of  Charlemagne  among  the 
French,  and  from  that  of  William  the  Con- 
queror among  the  English  [wrote  Adam 
Smith  in  1776],  the  proportion  between  the 
pound,  the  shilling  and  the  penny,  seems  to 
have  been  uniformly  the  same  as  at  present, 
though  the  value  of  each  has  been  very  differ- 
ent; for  in  every  country  of  the  world,  I  be- 
lieve, the  avarice  and  injustice  of  princes  and 
sovereign  states,  abusing  the  confidence  of 
their  subjects,  have  by  degrees  diminished  the 
real  quantity  of  metal  which  had  been  origi- 
nally contained  in  their  coins.  The  Roman  as, 
in  the  latter  ages  of  the  republic,  was  reduced 
to  the  twenty-fourth  part  of  its  original  value, 
and,  instead  of  weighing  a  pound,  came  to 


OF  EUROPE  7 

weigh  only  half  an  ounce.  The  English  pound 
and  penny  contain  at  present  about  a  third 
only;  the  Scots  pound  and  penny  about  a 
thirty-sixth ;  and  the  French  pound  and  penny 
about  a  sixty-sixth  part  of  their  original  value. 
By  means  of  those  operations,  the  princes  and 
sovereign  states  which  performed  them  were 
enabled,  in  appearance,  to  pay  their  debts  and 
fulfil  their  engagements  with  a  smaller  quan- 
tity of  silver  than  would  otherwise  have  been 
requisite.  It  was  indeed  in  appearance  only; 
for  their  creditors  were  really  defrauded  of  a 
part  of  what  was  due  to  them.  All  other  debt- 
ors in  the  state  were  allowed  the  same  privi- 
lege, and  might  pay  with  the  same  nominal 
sum  of  the  new  and  debased  coin  whatever 
they  had  borrowed  in  the  old.  Such  opera- 
tions, therefore,  have  always  proved  favour- 
able to  the  debtor,  and  ruinous  to  the  cred- 
itor, and  have  sometimes  produced  a  greater 
and  more  universal  revolution  in  the  for- 
tunes of  private  persons,  than  could  have  been 
occasioned  by  a  very  great  public  calamity.* 

2  Wealth  of  Nations,  Book  I,  chap.  iv. 


8  THE  PAPER  MONEYS 

John  Stuart  Mill  follows  his  master  in 
exposing  and  denouncing  what  he  calls 
this  "  least  covert  of  all  forms  of  knavery 
which  consists  in  calling  a  shilling  a 
pound."  But  the  opinions  of  Mill,  the 
saint  of  rationalism,  deserve  and  demand 
citation  as  they  bring  us  directly  to  our 
subject.  He  writes : 

When  gold  and  silver  had  become  virtually 
a  medium  of  exchange,  by  becoming  the  things 
for  which  peoplegenerally  sold,  and  with  which 
they  generally  bought,  whatever  they  had  to 
sell  or  buy;  the  contrivance  of  coining  ob- 
viously suggested  itself.  By  this  process  the 
metal  was  divided  into  convenient  portions,  of 
any  degree  of  smallness,  and  bearing  a  rec- 
ognised proportion  to  one  another;  and  the 
trouble  was  saved  of  weighing  and  assaying  at 
every  change  of  possessors,  an  inconvenience 
which  on  the  occasion  of  small  purchases  would 
soon  have  become  insupportable. 


OF  EUROPE  9 

Governments  found  it  their  interest  to  take 
the  operation  into  their  own  hands,  and  to  in- 
terdict all  coining  by  private  persons;  indeed, 
their  guarantee  was  often  the  only  one  which 
would  have  been  relied  on,  a  reliance  however 
which  very  often  it  ill  deserved ;  profligate  gov- 
ernments having  until  a  very  modern  period 
seldom  scrupled,  for  the  sake  of  robbing  their 
creditors,  to  confer  on  all  other  debtors  a  li- 
cence to  rob  theirs,  by  the  shallow  and  im- 
pudent artifice  of  lowering  the  standard;  that 
least  covert  of  all  modes  of  knavery,  which  con- 
sists in  calling  a  shilling  a  pound,  that  a  debt 
of  a  hundred  pounds  may  be  cancelled  by  the 
payment  of  a  hundred  shillings.  It  would  have 
been  as  simple  a  plan,  and  would  have  an- 
swered just  as  well,  to  have  enacted  that  "a 
hundred  "  should  always  be  interpreted  to  mean 
five,  which  would  have  effected  the  same  re- 
duction in  all  pecuniary  contracts,  and  would 
not  have  been  at  all  more  shameless.  Such 
strokes  of  policy  have  not  wholly  ceased  to  be 
recommended,  but  they  have  ceased  to  beprac- 


io         THE  PAPER  MONEYS 

tised, except  occasionally  through  the  medium 
of  paper  money,  in  which  case  the  character 
of  the  transaction,  from  the  greater  obscurity 
of  the  subject  is  a  little  less  barefaced.3 

A  few  illustrations  from  the  past  may 
help  us  to  a  critical  contemplation  ot  the 
present  monetary  conditions  on  the  con- 
tinent of  Europe,  which  constitute  fraud 
and  robbery  on  the  most  wholesale  scale 
ever  practised  by  governments  (with  the 
style  and  title  of  democracies  !)  upon  the 
miserable  victims,  called  citizens,  and 
supposed  to  be  endowed  with  the  blessings 
of  self-determination. 

Those  who  believe  that  war,  if  not  a 
divine  institution,  is  at  least  an  inevitable 
feature  of  human  society  may  plead  in  ex- 

3  Mill,  Political  Economy  Book  III,  chap.  VH. 


OF  EUROPE  ii 

tenuation  of  this  species  of  fraud  that  it 
is  usually  the  last  desperate  resource  of 
a  government  which  has  pledged  all  its 
taxes  and  credit  for  war  or  armaments. 

I  remember  reading  in  the  Roman  his- 
torian Sallust  of  a  financial  crisis  which 
was  ended  by  debts  contracted  in  silver 
being  paid  off  in  copper — argentum  are 
solutum  est. 

A  few  years  before  Adam  Smith  wrote 
his  chapter  on  money,  Frederick  the 
Great,  during  the  Seven  Years'  War,  re- 
sorted to  the  Jew,  Ephraim,  who  coined 
tin  silver: 

Outside  noble,  inside  slim, 
Outside  Frederick,  inside  Ephraim. 

But  Frederick,  wiser  and  more  honest 
than  our  European  belligerents,  made  it 


12         THE  PAPER  MONEYS 

his  first  care  after  the  peace  to  restore  an 
honest  silver  coinage. 

A  lively  example  from  English,  or 
rather  Irish,  history  is  supplied  by  Ma- 
caulay  and  belongs  to  the  year  1689.  It  is 
one  of  the  incidents  in  James  the  Second's 
brief  and  luckless  government  of  Ireland: 

It  is  remarkable  that  while  the  King  [James 
II]  was  losing  the  confidence  and  good  will 
of  the  Irish  Commons  by  faintly  defending 
against  them,  in  one  quarter,  the  institution  of 
property,  he  was  himself,  in  another  quarter, 
attacking  that  institution  with  a  violence,  if  pos- 
sible more  reckless  than  theirs. 

He  soon  found  that  no  money  came  into 
his  Exchequer.  The  cause  was  sufficiently  ob- 
vious. Trade  was  at  an  end.  Floating  capital 
had  been  withdrawn  in  great  masses  from  the 
island.  Of  the  fixed  capital  much  had  been  de- 
stroyed, and  the  rest  was  lying  idle.  Thou- 


OF  EUROPE  13 

sands  of  those  Protestants  who  were  the  most 
industrious  and  intelligent  part  of  the  popula- 
tion had  emigrated  to  England.  Thousands 
had  taken  refuge  in  the  places  which  still  held 
out  for  William  and  Mary.  Of  the  Roman 
Catholic  peasantry,  who  were  in  the  vigor  of 
life,  the  majority  had  enlisted  in  the  army  or 
had  joined  gangs  of  plunderers.  The  poverty 
of  the  treasury  was  the  necessary  effect  of  the 
poverty  of  the  country :  public  prosperity  could 
be  restored  only  by  the  restoration  of  private 
prosperity ;  and  private  prosperity  could  be  re- 
stored only  by  years  of  peace  and  security. 
James  was  absurd  enough  to  imagine  that  there 
was  a  more  speedy  and  efficacious  remedy.  He 
could,  he  conceived,  at  once  extricate  himself 
from  his  financial  difficulties  by  the  simple 
process  of  calling  a  farthing  a  shilling. 

The  right  of  coining  was  undoubtedly  a 
flower  of  the  prerogative;  and,  in  his  view,  the 
right  of  coming  included  the  right  of  debasing 
the  coin.  Pots,  pans,  knockers  of  doors,  pieces 
of  ordnance  which  had  long  been  past  use,  were 


14         THE  PAPER  MONEYS 

carried  to  the  mint.  In  a  short  time  lumps  of 
base  metal,  nominally  worth  near  a  million 
sterling,  intrinsically  worth  about  asixtieth  part 
of  that  sum,  were  in  circulation.  A  royal  edict 
declared  these  pieces  to  be  legal  tender  in  all 
cases  whatsoever.  A  mortgage  for  a  thousand 
pounds  was  cleared  off  by  a  bag  of  counters 
made  out  of  old  kettles.  The  creditors  who 
complained  to  the  Court  of  Chancery  were  told 
by  Fitton  to  take  their  money  and  begone. 

But  of  all  classes,  the  tradesmen  of  Dublin, 
who  were  generally  Protestants,  were  the  great- 
est losers.  At  first,  of  course,  they  raised  their 
demands;  but  the  magistrates  of  the  city  took 
on  themselves  to  meet  this  heretical  inclina- 
tion by  putting  forth  a  tariff  regulating  prices. 
Any  man  who  belonged  to  the  caste  now 
dominant  might  walk  into  a  shop,  lay  on  the 
counter  a  bit  of  brass  worth  threepence,  and 
carry  off  goods  to  the  value  of  half  a  guinea. 
Legal  remedies  were  out  of  the  question.  In- 
deed the  sufferers  thought  themselves  happy 
if,  by  the  sacrifice  of  their  stock  in  trade,  they 


OF  EUROPE  15 

could  redeem  their  limbs  and  their  lives.  There 
was  not  a  baker's  shop  in  the  city  round  which 
twenty  or  thirty  soldiers  were  not  constantly 
prowling.  Some  persons  who  refused  the  base 
money  were  arrested  by  troopers  and  carried 
before  the  Provost  Marshal,  who  cursed  them, 
swore  at  them,  locked  them  up  in  dark  cells, 
and,  by  threatening  to  hang  them  at  their  own 
doors,  soon  overcame  their  resistance.  Of  all 
the  plagues  of  that  time  none  made  a  deeper 
or  a  more  lasting  impression  on  the  minds  of 
the  Protestants  of  Dublin  than  the  plague  of 
brass  money.  To  the  recollection  of  the  con- 
fusion and  misery  which  had  been  produced 
by  James'  coin  must  be  in  part  ascribed  the 
strenuous  opposition  which,  thirty-five  years 
later,  large  classes  firmly  attached  to  the  House 
of  Hanover,  offered  to  the  government  of 
George  the  First  in  the  affair  of  Woods' 
Patent.4 

4  Macaulay,  History  of  England,  I,  chap.  XH.  "The 
Affair  of  Woods'  Patent"  is  celebrated  in  Swift's  Drapier 
letters. 


1 6         THE  PAPER  MONEYS 

But  paper  money  offers  far  more  ex- 
tensive facilities  to  knavery  than  a  metallic 
currency.  In  his  Essays  on  the  Monetary 
History  of  the  United  States?  Mr.  Charles 
J.  Bullock  has  described  in  sufficient  de- 
tail the  "carnival  of  fraud  and  corrup- 
tion" which  attended  the  paper  money 
coined  or  rather  printed  by  most  of  the 
American  colonies  in  the  century  preced- 
ing the  American  Revolution.  Thus, 
about  the  middle  of  the  eighteenth  cen- 
tury, the  paper  money  of  Massachusetts 
fell  to  an  eighth  of  its  original  value. 
People  were  driven  to  barter,  and  one 
writer  observed  that  "  the  morals  of  the 
people  depreciate  with  the  currency." 
Parties  were  divided  into  debtors  and 

s  Macmillan,  1900. 


OF  EUROPE  17 

creditors,  and  a  New  England  writer  in 
1749  noted:  "The  Debtor  side  has  had 
the  ascendant  ever  since  anno  1 74 1  to  the 
almost  utter  ruin  of  the  country."6  To 
this  writer  belongs  the  credit  of  discern- 
ing, at  a  time  when  even  Benjamin  Frank- 
lin was  in  error,  that  "the  repeated  large 
emissions  of  Paper  Money  "  were  respon- 
sible for  its  depreciation. 

"Not  worth  a  Continental"  is  an  ex- 
pression which  brings  us  to  the  next 
chapter  in  American  experience  of  in- 
convertible paper  currencies.  The  so- 
called  Continental  money  was  the  means 
by  which  the  Continental  Congress  and 
the  individual  colonies  —  too  timid  to  tax 
—  endeavored  to  finance  the  Revolu- 

6  Douglass. 


1 8          THE  PAPER  MONEYS 

tionary  War.  By  1781,  a  paper  dollar 
was  worth  less  than  two  cents  in  specie, 
and  soon  afterward  it  became  practi- 
cally worthless.7  Robbery  was  legalized ; 
rogues  flourished ;  and  their  frauds  were 
encouraged  and  protected  by  a  govern- 
ment whose  policy  enabled  debtors  to  pay 
their  debts  in  valueless  money.  We  hear 
of  creditors  running  away  from  their  debt- 
ors and  being  paid  off"  without  mercy." 
Stories  were  told  of  creditors  in  Rhode 
Island  leaping  out  of  back  windows  to 
escape  the  attentions  of  their  debtors.8  In 
short,  the  law  became  an  engine  of  op- 
pression and  destroyed  the  fortunes  of 

7  Bullock,    Monetary    History    of  the    United   States, 
chap.  v. 

8  Ibid.,  chap.  v.  In  1780  Congress  actually  adopted  a 
plan  to  redeem  its  paper  issues  at  one  fortieth  of  their  pre- 
tended or  nominal  value. 


OF  EUROPE  19 

thousands  who  had  put  their  confidence 
in  it.  In  the  words  of  Breck,  a  friendly 
critic, "...  the  old  debts  were  paid  when 
the  paper  money  was  more  than  seventy 
to  one  .  .  .  widows,  orphans  and  others 
were  paid  for  money  lent  in  specie  with 
depreciated  paper." 

The  astonishing  thing  is  that  all  this 
knavery  was  devised,  or  winked  at,  not 
only  by  low  class  politicians  but  by  states- 
men of  renown.  The  maxim  salus  populi 
suprema  lex  was  relied  upon  not  for  the 
first  or  last  time  as  a  sufficient  excuse  for 
a  crime  far  more  pernicious  than  that  of 
a  private  forger.  But  we  have  not  yet  real- 
ized, in  our  minds  or  in  our  penal  codes, 
that  public  vices  ought  to  be  punished  at 
least  as  vigorously  as  private  crimes. 


20         THE  PAPER  MONEYS 

That,  even  as  a  desperate  last  resort 
for  financing  war,  a  flood  of  paper 
money  defeats  its  own  object  was  con- 
clusively proved  a  few  years  later  during 
the  French  Revolution.  The  French  as- 
signats  "  have  taken  their  place  in  history 
as  the  classical  example  of  paper  money 
made  worthless  by  over-issue.  After  their 
final  collapse  in  1796,  French  finance 
reverted  perforce  to  a  metallic  basis." 
So  Mr.  Hawtrey,  a  British  Treasury 
official,  who  has  given  us  recently  a  lu- 
cid and  sufficiently  detailed  account  of 
this  extraordinary  incident  —  extraordi- 
nary but  no  longer  singular,  for  the  same 
course  with  the  same  results  has  been 
pursued  during  and  since  the  war  of 
1914-1918  by  Russia  and  Poland,  and  in 


OF  EUROPE  21 

a  greater  or  less  degree  by  most  of  the 
European  belligerents. 

The  issue  of  French  assignats  began  in 
1789  because  the  assembly  would  not 
vote  adequate  taxation,  and  Necker,  the 
minister  of  finance,  was  unable  to  borrow 
enough  to  cover  the  deficit.  In  the  two 
years  from  1 789  to  1 79 1 ,  the  public  rev- 
enue was  470  millions,  and  the  public 
expenditures,  1719  millions,  of  livres. 
The  deficit  was  covered  by  assignats,  or 
paper  livres,  bearing  interest,  in  denom- 
inations varying  from  1000  to  5  livres. 
Thus  the  assignats  may  be  regarded  as  a 
floating  debt  currency.  In  November, 
1791,  the  assignats  were  worth  5  2  per  cent 
of  their  face  value.  In  June,  1792,  after 
the  declaration  of  war  on  Austria,  they 


22         THE  PAPER  MONEYS 

rose  to  57.  After  the  victory  of  Valmy, 
in  September,  they  rose  to  72  and  re- 
mained there  till  December.  In  January, 
1793,  the  king  was  guillotined,  and  war 
was  declared  on  England.  By  August, 
after  violent  fluctuations,  the  assignat  had 
fallen  to  15  per  cent  of  its  face  value. 
Thereafter  the  laws  enforcing  the  ac- 
ceptance of  assignats  were  strengthened. 

It  became  an  offence  to  sell  coin,  or  to  dif- 
ferentiate between  coin  and  assignats  in  any 
transaction,  or  to  refuse  payment  in  assignats, 
or  to  negotiate  assignats  at  a  discount.  By  a 
decree  of  the  5th  of  September  the  death  pen- 
alty itself  was  imposed.  Here  was  a  forced 
currency  indeed.9 

For  a  few  months  an  artificial  im- 

9  R.   G.    Hawtrey,  Currency  and  Credit.    Longmans 
Green  &  Co.,  London,  1919. 


OF  EUROPE  23 

provement  was  effected  in  the  value  of 
the  assignat  by  these  ferocious  measures ; 
but  in  1795,  after  the  Terror,  the  system 
and  the  paper  money  collapsed.  The 
gold  and  silver  money,  which  had  been 
hoarded,  returned  to  circulation.  In 
June,  1 795,  the  quotation  of  the  assignat 
oscillated  violently.  On  one  day  a  louis 
of  24  livres  would  buy  450  paper  livres, 
on  another,  icoo.10  Paper  notes  which 
fluctuated  so  violently  were  useless  as 
money.  They  could  not  serve  either  as  a 
medium  of  exchange  or  as  a  measure  of 
value.  Country  people  expressed  their 
contempt  for  the  assignats  by  calling 
them  r argent  de  Paris. 

A  new  currency  of  mandats  was  tried, 

10  Hawtrcy,  op.  fit.,  chap.  xv. 


24         THE  PAPER  MONEYS 

into  which  assignats  were  made  convert- 
ible. It  was  a  complete  failure.  The 
assignats  were  wound  up  in  1 796,  and  in 
February,  1797,  there  was  "a  general 
demonetisation  of  paper  money."  "  The 
holders  got  practically  nothing.  France 
returned  to  hard  cash,  as  Mexico  has 
done  recently.  In  1 9 1 8,  v/hen  Mr.  Haw- 
trey  wrote,  he  was  able  to  describe  the 
decline  and  full  of  the  assignats  as  an 
'almost  unique*  instance  of  "the  cur- 
rency of  a  great  nation  fading  away  into 
nothing."  The  Russian  paper  rouble  has 
performed  the  same  feat  since  1918.  So 
has  the  Polish  mark.  And  now  (Decem- 
ber, 1921)  the  German  paper  mark  is  also 

11  A  turn  which  even  a  Polish  Chancellor  of  the  Ex- 
chequer might  envy. 


OF  EUROPE  25 

fading  into  nothingness.13  In  Austria  and 
in  most  of  the  new  states  of  Europe,  the 
inconvertible  paper  legal  tender  currency 
has  lost  almost  the  whole  of  its  value,  in 
comparison  with  the  pre-war  coin  which 
it  pretends  to  represent. 

The  real  difference  between  the  pres- 
ent monetary  conditions  and  the  Amer- 
ican continentals,  or  the  French  assignats, 
is  a  difference  not  of  kind,  but  of  degree 
and  extent.  The  causes  and  the  conse- 
quences, the  motives  of  those  who  work 
the  mint,  the  ruin  and  demoralization  of 
the  victims,  the  effects  upon  public  and 
private  debts  and  credit  are  the  same. 
But  a  whole  continent  populated  by  four 

12  In  the  second  week  of  November  the  mark  fell  to  I  300 
to  the  paper  pound,  recovering  a  day  or  two  later  (Wednes- 
day, November  9)  to  980. 


26          THE  PAPER  MONEYS 

hundred  millions  of  people  is  concerned. 
The  commercial  and  moral  fabric  of 
European  civilization  is  tottering.  Three 
years  have  passed  since  the  war  ended; 
but  the  currencies  and  exchanges  of 
Europe  are  in  a  much  worse  condition 
than  when  peace  was  being  negotiated. 

At  the  end  of  June,  1921,  I  walked 
from  my  office  in  the  Strand  down  to 
Messrs.  Hands  &  Co.,  who  deal  in  for- 
eign money  at  Charing  Cross.  On  the 
way  I  passed  the  shop  of  a  tailor,  who  had 
placarded  on  his  shop  window  the  an- 
nouncement that  he  would  give  a  hun- 
dred thousand  roubles  to  every  customer 
who  bought  a  suit  of  clothes  from  him. 
He  added  that  at  the  pre-war  rate  of  ex- 
change the  one  hundred  thousand  roubles 


OF  EUROPE  27 

would  be  worth  ten  thousand  pounds. 
He  did  not  add  that  they  were  at  that  time 
worth  only  two  shillings.'3  On  arriving 
at  my  destination,  I  asked  to  see  speci- 
mens of  the  most  debased  currencies  and 
eventually  laid  out  ten  shillings,'4  or,  to  be 
exact,  gs/iod.  Here  is  the  bill: 

Ten  German  marks  cost  me  one  shilling 

A  hundred  Austrian  crowns  cost  me  one  and  sixpence 

A  hundred  Polish  marks  cost  me  sixpence 
Twenty-five  Russian  (Czar)  '5 

roubles  (1909)  cost  me  sixpence 

Two  Italian  lire  cost  me  eightpence 

Two  Greek  drachmas  cost  me  eightpence 

Two  Roumanian  lei  cost  me  sixpence 

Five  Yugoslav  dinars  l6  cost  me  one  shilling 

'•J  A  month  or  two  later  they  were  not  worth  a  shilling. 
The  Russian  Soviet  Government  was  offering  two  hundred 
thousand  roubles  for  one  pre-war  silver  rouble  ! 

'•»  Two  dollars. 

'5  Twenty -five  Soviet  roubles  would  have  been  dear  at  a 
farthing. 

16  On  this  note  is  stamped  20  Kruna  to  indicate  that  five 
dinars  exchanged  for  twenty  Austrian  crowns. 


a8          THE  PAPER  MONEYS 

Ten  Czechoslovakia!!  crowns  cost  me  one  shilling 

Five  Bulgarian  levas  cost  me  sixpence 

Five  Finnish  marks  cost  me  one  shilling 

Five  Esthonian  marks  cost  me  one  shilling 

Five  Latvian  roubles  cost  me  sixpence 

To  show  that  my  friend,  the  exchange 
dealer,  made  a  decent  profit  out  of  this  re- 
tail transaction,  I  quote  some  of  his  sell- 
ing rates  for  the  day  on  which  he  based 
his  charges : 


"  » 

Rates  of  Exchange 

Junt  29,  1921 

Austrian  paper  crowrs 

2400-2600 

for  £i 

Finnish  marks 

220—240 

for  £i 

German  marks 

265-275 

for  £i 

Polish  marks 

6000  (selling  rate) 

for  £i 

Greek  drachmas 

62-65 

for£i 

Italian  lire 

76-77 

for£i 

Roumanian  lei 

230—250 

for  £i 

The  last  I  heard  from  Vienna  was  that 
they  had  been  varying  from  ten  thousand 
to  fifteen  thousand  to  the  paper  pound ! 
The  difference  in  the  rates  depended, 


OF  EUROPE  29 

of  course,  upon  whether  the  customer 
was  buying  or  selling  the  foreign  money. 
If  he  was  buying  Austrian  notes,  he  would 
get  twenty-four  hundred  paper  crowns 
for  a  pound.  If  he  was  selling  them, 
he  would  receive  a  pound  in  exchange 
for  twenty-six  hundred  paper  crowns. 

All  these  paper  notes  are  called  after, 
and  profess  to  represent,  silver  coins, 
which  were  themselves  before  the  war, 
tokens,  and  passed  current  at  more  than 
their  intrinsic  value  because  of  their  re- 
lation to  gold. 

Thus  the  pre-war  parity  of  marks  was 
about  twenty  to  the  gold  pound;  of 
Austrian  crowns,  about  twenty-four;  of 
francs,  lire,  etc.,  about  twenty-five.  On 
the  day  of  my  purchase,  therefore,  the  ex- 


30          THE  PAPER  MONEYS 

change  value  of  the  German  mark  was 
less  than  one  thirteenth,  of  the  Austrian 
crown  less  than  one  one  hundredth,  and  of 
the  Polish  mark,  one  two  hundredth,  of 
its  pre-war  status.  But  this  underestimates 
the  depreciation;  for  the  British  pound 
is  no  longer  a  gold  sovereign,  and  even 
gold  has  been  depreciated.17  The  paper 
pound  in  June,  1921,  was,  I  think,  about 
the  equivalent  of  twelve  pre-war  shillings 
in  purchasing  power.  The  gold  dollar, 
which  would  only  buy  a  little  more  than 
four  shillings  before  the  war,  would  buy 
five  at  the  beginning  of  December,  1921. 
Although  an  inconvertible  paper  cur- 

'7  To-day,  November  30,  1921,  the  paper  pound  is 
worth  about  four  fifths  of  a  gold  pound.  The  purchasing 
power  of  gold — say,  the  gold  dollar  —  is  perhaps  about 
two  thirds  of  what  it  was  before  the  war. 


OF  EUROPE  31 

rency  has  no  intrinsic  value,  it  can  (in 
accordance  with  the  quantity  theory  of 
money)  be  maintained  at  a  fairly  stable 
ratio  to  gold  or  commodities  by  an  hon- 
est government  if  the  total  issue  is  fixed, 
or  kept  between  reasonable  maximum 
and  minimum  limits.  The  rise  of  prices 
since  the  war,  in  each  country  where  re- 
liable statistics  are  available,  has  been  in 
proportion  to  the  expansion  of  the  paper 
currency,  allowance  being  made  for  the 
scarcity  of  commodities.  Of  course  a  de- 
cline in  purchasing  power  follows  an  ex- 
pansion of  circulation.  The  stability  of 
the  British  paper  pound  since  a  limit  was 
imposed  illustrates  the  correctness  of  the 
quantity  theory  of  money.  Its  increase 
in  purchasing  power  (like  that  of  the  gold 


32          THE  PAPER  MONEYS 

dollar)  during  the  first  half  of  1921  is,  of 
course,  due  to  the  fact  that  the  supply  of 
utilities  had  overtaken  the  demand. 

At  first  sight  it  seems  difficult  to  under- 
stand how  any  government,  however  bad, 
can  deliberately  issue  flood  upon  flood  of 
inconvertible  paper  money,  seeing  that 
its  printing  operations  are  ruinous  to  both 
public  and  private  credit.  To  obtain  the 
same  amount  of  revenue,  each  new  issue, 
each  new  dose,  has  to  be  much  larger 
than  the  preceding.  In  the  course  of 
twelve  months,  for  example,  the  ex- 
change value  of  the  Polish  mark  was 
divided  by  ten,  that  is,  at  the  end  of  the 
period,  ten  times  as  much  paper  money 
had  to  be  printed  as  at  the  beginning,  to 
get  the  same  revenue.  Yet  the  Polish 


OF  EUROPE  33 

Government  continued  upon  its  course 
with  the  approval  and  support  of  the 
Polish  Diet. 

The  following  quotation  is  from  the 
Warsaw  correspondent  of  the  London 
Economist,  who  wrote  on  July  28,  1921 : 

The  effects  of  the  last  collapse  of  the  ex- 
changes are  beginning  to  make  themselves 
felt,  and  the  Diet  is  already  preparing  fresh 
ground  for  new  currency  inflation.  By  its  last 
vote  the  limit  on  the  note  circulation  has  been 
increased  to  118  milliards,  and  on  the  ad- 
vances of  the  Polish  National  Bank  to  the 
Government  to  150  milliards. 

The  depreciation  of  the  Polish  mark  in 
June  was  followed  by  a  rise  of  prices,  and  this 
led  immediately  to  a  strike  movement  in 
almost  all  industries.  In  the  Lodz  district 
40,000  workmen  have  gone  on  strike,  de- 
manding a  wage  increase  of  120  per  cent! 
The  manufacturers  declare  that  they  cannot 


34          THE  PAPER  MONEYS 

raise  wages  by  more  than  20  per  cent;  that 
even  undei^present  conditions  the  Polish  tex- 
tile industry  is  in  a  most  difficult  position  on 
the  foreign  markets,  especially  in  Roumania, 
the  Baltic  States,  etc.  Posnania  was  menaced 
by  an  agrarian  strike,  but  a  settlement  has 
been  reached.  The  strike  of  the  municipal 
workers  in  Warsaw  was  short-lived.  Every- 
where, however,  wages  have  been  increased  by 
more  than  50  per  cent.  This  naturally  will 
entail  a  new  wave  of  rising  prices,  the  Gov- 
ernment will  be  obliged  to  double  the  salaries 
of  its  officials,  and  the  printing  press  will 
work  again  under  a  higher  pressure.  This  is 
the  vicious  circle  round  which  the  country  has 
been  travelling  for  three  years. 

Ex  uno  disce  omnes.  The  monetary  pol- 
icy of  the  Polish  Government  is  merely  a 
flagrant  example  of  the  recent  monetary 
history  of  all  the  states  of  Europe  north- 
east, southeast,  east,  of  the  Rhine  and  of 


OF  EUROPE  35 

the  Alps.  There  is  only  one  real  remedy, 
the  reestablishment  of  complete  peace, 
disarmament,  the  abolition  of  conscrip- 
tion, the  drastic  reduction  of  bloated 
bureaucracies,  and  a  wholesale  lowering 
of  tariffs,  which  will  allow  the  miserable 
and  half-starved  populations  to  renew  the 
arts  of  peace  and  the  exchange  of  their 
agricultural  products  and  manufactures. 


APPENDIX 

THE  BRUSSELS  CONFERENCE1 

IF  all  countries  were  included,  a  general  and 
proportionate  reduction  of  the  military  and 
naval  establishments  to  one  half  of  their  pres- 
ent cost  would  set  free  a  fund  of  probably  at 
least  $3,000,000,000  to  $4,000,000,000  an- 
nually for  the  purchase  of  food  and  useful 
commodities,  for  the  stabilization  and  partial 
restoration  of  debased  paper  currencies,  for 
the  payment  of  debt,  the  removal  of  public 
deficits,  the  revival  of  credit,  and  the  reduc- 
tion of  taxes.  Thus  the  road  to  recovery  lies 
plain  before  us.  Will  it  be  taken  by  the  states- 
men to  whose  hands  the  peoples  have  in- 
trusted their  lives  and  fortunes? 

DEFICITS  THE  RULE 

I  n  order  to  show  that  this  view  is  in  conform- 
ity with  the  conclusions  of  experts,  and  even 

1  Taken  by  permission  from  an  article  by  the  author  in  the 
Saturday  Evening  Post  of  November  12,  1921. 


38  APPENDIX 

of  officials  delegated  for  the  purpose  of  exam- 
ining world  finance  by  the  governments  them- 
selves, I  turn  to  the  conclusions  unanimously 
arrived  at  by  the  Brussels  conference  a  year 
ago,  after  eighty-six  financial  experts  from 
thirty-nine  countries  had  presented  the  ac- 
counts and  balance  sheets  of  their  respective 
governments.  In  a  general  review  of  the  sit- 
uation they  point  out  that  "the  total  external 
debt  of  the  European  belligerents,  converted 
into  dollars  at  par,  amounts  to  about  155  mil- 
liard dollars,  compared  with  about  17  milliard 
dollars  in  1913."  They  say  that  the  govern- 
ment expenditures  of  the  European  belliger- 
ents amount  to  between  20  and  40  per  cent  of 
the  total  incomes  of  the  peoples.  They  say 
emphatically  that  the  restoration  of  real  peace, 
with  disarmament,  is  "  the  first  condition  for 
the  world's  recovery." 

Four  commissions  were  appointed.  The 
first  dealt  with  public  finance,  and  its  resolu- 
tions were  adopted  unanimously  by  the  con- 
ference. The  following  extract  from  its  reso- 
lutions deserves  attention : 


APPENDIX  39 

Thirty-nine  nations  have  in  turn  placed  before  the 
International  Financial  Conference  a  statement  of 
their  financial  position.  The  examination  of  these 
statements  brings  out  the  extreme  gravity  of  the  gen- 
eral situation  of  public  finance  throughout  the  world, 
and  particularly  in  Europe.  Their  import  may  be 
summed  up  in  the  statement  that  three  out  of  every 
four  of  the  countries  represented  at  this  conference 
and  eleven  out  of  twelve  of  the  European  countries 
anticipate  a  budget  deficit  in  the  present  year.  Public 
opinion  is  largely  responsible  for  this  situation.  The 
close  connection  between  these  budget  deficits  and 
the  cost  of  living,  which  is  causing  such  suffering 
and  unrest  throughout  the  world,  is  far  from  being 
grasped.  Nearly  every  government  is  being  pressed 
to  incur  fresh  expenditure;  largely  on  palliatives 
which  aggravate  the  very  evils  against  which  they  are 
directed.  The  first  step  is  to  bring  public  opinion  in 
every  country  to  realize  the  essential  facts  of  the  sit- 
uation and  particularly  the  need  for  reestablishing 
public  finances  on  a  sound  basis  as  a  preliminary  to 
the  execution  of  those  social  reforms  which  the 
world  demands. 

Public  attention  should  be  especially  drawn  to  the 
fact  that  the  reduction  of  prices  and  the  restoration 
of  prosperity  is  dependent  on  the  increase  of  produc- 
tion, and  that  the  continual  excess  of  government 
expenditure  over  revenue  represented  by  budget 
deficits  is  one  of  the  most  serious  obstacles  to  such 


40  APPENDIX 

increase  of  production,  as  it  must  sooner  or  later 
involve  the  following  consequences : 

(a)  A  further  inflation  of  credit  and  currency. 

(Z>)  A  further  depreciation  in  the  purchasing 
power  of  the  domestic  currency,  and  a  still  greater 
instability  of  the  foreign  exchanges. 

(f)  A  further  rise  in  prices  and  in  the  cost  of 
living. 

The  country  which  accepts  the  policy  of  budget 
deficits  is  treading  the  slippery  path  which  leads  to 
general  ruin;  to  escape  from  that  path  no  sacrifice 
is  too  great.  It  is  therefore  imperative  that  every 
government  should,  as  the  first  social  and  financial 
reform,  on  which  all  others  depend : 

(<z)  Restrict  its  ordinary  recurrent  expenditure, 
including  the  service  of  the  debt,  to  such  an  amount 
as  can  be  covered  by  its  ordinary  revenue. 

(£)  Rigidly  reduce  all  expenditure  on  armaments 
in  so  far  as  such  reduction  is  compatible  with  the 
preservation  of  national  security. 

(c)  Abandon  all  unproductive  extraordinary  ex- 
penditure. 

(d)  Restrict  even  productive  extraordinary  ex- 
penditure to  the  lowest  possible  amount. 

The  Supreme  Council  of  the  Allied  Powers  in  its 
pronouncement  on  the  eighth  of  March  declared  that 
"armies  should  everywhere  be  reduced  to  a  peace 
footing ;  that  armaments  should  be  limited  to  the 
lowest  possible  figure  compatible  with  national  se- 


APPENDIX  41 

curity  and  that  the  League  of  Nations  should  be  in- 
vited to  consider,  as  soon  as  possible,  proposals  to 
this  end." 

The  statements  presented  to  the  conference  show 
that,  on  an  average,  some  20  per  cent  of  the  na- 
tional expenditure  is  still  being  devoted  to  the  main- 
tenance of  armaments  and  the  preparations  for  war. 
The  conference  desires  to  affirm  with  the  utmost 
emphasis  that  the  world  cannot  afford  this  expendi- 
ture. Only  by  a  frank  policy  of  mutual  cooperation 
can  the  nations  hope  to  regain  their  old  prosperity, 
and  in  order  to  secure  that  result,  the  whole  re- 
sources of  each  country  must  be  devoted  to  strictly 
productive  purposes. 

The  conference  accordingly  recommends  most 
earnestly  to  the  Council  of  the  League  of  Nations 
the  desirability  of  conferring  at  once  with  the  several 
governments  concerned,  with  a  view  to  securing  a 
general  and  agreed  reduction  of  the  crushing  bur- 
dens which  on  their  existing  scale  armaments  still 
impose  on  the  impoverished  peoples  of  the  world, 
sapping  their  resource  and  imperiling  their  recovery 
from  the  ravages  of  war.  The  conference  hopes 
that  the  Assembly  of  the  League,  which  is  about  to 
meet,  will  take  energetic  action  to  this  end. 

The  above  recommendations  were  ignored 
by  the  League  of  Nations  and  by  practically 
all  the  governments  concerned.  Consequently 


42  APPENDIX 

the  debts  and  deficits  of  most  European  coun- 
tries are  larger  at  the  present  time  than  they 
were  a  year  ago,  and  most  of  the  paper  cur- 
rencies have  depreciated  —  some  very  heavily 
—  during  the  last  twelve  months. 

THE  DANGERS  OF  INFLATION 

I  turn  next  to  the  resolutions  proposed  by 
the  second  commission  which  had  to  examine 
problems  of  currency  and  foreign  exchange. 

From  its  resolutions,  which  also  were 
adopted  unanimously  by  the  conference,  I  ex- 
tract the  following : 

The  currencies  of  all  belligerent  and  of  many 
other  countries,  though  in  greatly  varying  degrees, 
have  since  the  beginning  of  the  war  been  expanded 
artificially,  regardless  of  the  usual  restraints  upon 
such  expansion  —  to  which  we  refer  later  —  and 
without  any  corresponding  increase  in  the  real 
wealth  upon  which  their  purchasing  power  was 
based ;  indeed  in  most  cases  in  spite  of  a  serious  re- 
duction in  such  wealth. 

It  should  be  clearly  understood  that  this  artificial 
and  unrestrained  expansion,  or  inflation,  as  it  is 
called,  of  the  currency  or  of  the  titles  to  immediate 
purchasing  power  does  not  and  cannot  add  to  the 


APPENDIX  43 

total  real  purchasing  power  in  existence,  so  that  its 
effect  must  be  to  reduce  the  purchasing  power  of 
each  unit  of  the  currency.  It  is  in  fact  a  form  of 
debasing  the  currency. 

The  effect  of  it  has  been  to  intensify,  in  terms  of 
the  inflated  currencies,  the  general  rise  in  prices,  so 
that  a  greater  amount  of  such  currency  is  needed  to 
procure  the  accustomed  supply  of  goods  and  serv- 
ices. Where  this  additional  currency  was  procured 
by  further  inflation  —  that  is,  by  printing  more  paper 
money  or  creating  fresh  credit  —  there  arose  what 
has  been  called  a  vicious  spiral  of  constantly  rising 
prices  and  wages  and  constantly  increasing  inflation, 
with  the  resulting  disorganization  of  all  business, 
dislocation  of  the  exchanges,  a  progressive  increase 
in  the  cost  of  living,  and  consequent  labor  unrest. 

It  is  of  the  utmost  importance  that  the  growth 
of  inflation  should  be  stopped ;  and  this,  although 
no  doubt  very  difficult  to  do  immediately  in  some 
countries,  could  quickly  be  accomplished  by  ab- 
staining from  increasing  the  currency  —  in  its 
broadest  sense,  as  defined  above  —  and  by  increas- 
ing the  real  wealth  upon  which  such  currency  is 
based. 

The  cessation  of  increase  in  the  currency  should 
not  be  achieved  merely  by  restricting  the  issue  of 
legal  tender.  Such  a  step,  if  unaccompanied  by  other 
measures,  would  be  apt  to  aggravate  the  situation  by 
causing  a  monetary  crisis.  It  is  necessary  to  attack 


44  APPENDIX 

the  causes  which  lead  to  the  necessity  for  the  ad- 
ditional currency. 

The  chief  cause  in  most  countries  is  that  the  gov- 
ernments, finding  themselves  unable  to  meet  their  ex- 
penditures out  of  revenue,  have  been  tempted  to  re- 
sort to  the  artificial  creation  of  fresh  purchasing 
power,  either  by  the  direct  issue  of  additional  legal- 
tender  money  or  more  frequently  by  obtaining  — 
especially  from  the  banks  of  issue,  which  in  some 
cases  are  unable  and  in  others  unwilling  to  refuse 
them  —  credits  which  must  themselves  be  satisfied 
in  legal-tender  money.  We  say,  therefore,  that  gov- 
ernments must  limit  their  expenditure  to  their  rev- 
enue. 

Here  again  we  have  excellent  doctrines  and 
good  practical  advice  from  these  financial  ex- 
perts to  the  governments  which  appointed 
them.  But  the  doctrines  have  remained  un- 
applied, and  the  advice  has  been  honored  in 
the  breach  instead  of  in  the  observance. 

WISE  COUNSEL  IGNORED 

I  pass  next  to  the  resolutions  proposed  by 
the  commission  on  international  trade  and 
adopted  unanimously  by  the  conference,  from 
which  the  first  two  paragraphs  will  be  quoted : 


APPENDIX  45 

The  International  Financial  Conference  affirms 
that  the  first  condition  for  the  resumption  of  inter- 
national trade  is  the  restoration  of  real  peace,  the 
conclusion  of  the  wars  which  are  still  being  waged 
and  the  assured  maintenance  of  peace  for  the  future. 
The  continuance  of  the  atmosphere  of  war  and  of 
preparations  for  war  is  fatal  to  the  development  of 
that  mutual  trust  which  is  essential  to  the  resump- 
tion of  normal  trading  relations.  The  security  of 
internal  conditions  is  scarcely  less  important,  as 
foreign  trade  cannot  prosper  in  a  country  whose  in- 
ternal conditions  do  not  inspire  confidence.  The 
conference  trusts  that  the  League  of  Nations  will 
lose  no  opportunity  to  secure  the  full  restoration  and 
continued  maintenance  of  peace. 

The  International  Financial  Conference  affirms 
that  the  improvement  of  the  financial  position  largely 
depends  on  the  general  restoration  as  soon  as  possi- 
ble of  good  will  between  the  various  nations;  and 
in  particular  it  indorses  the  declaration  of  the  Su- 
preme Council  of  the  eighth  March  last  "  that  the 
States  which  have  been  created  or  enlarged  as  a  re- 
sult of  the  war  should  at  once  reestablish  full  and 
friendly  cooperation  and  arrange  for  the  unrestricted 
interchange  of  commodities  in  order  that  the  essen- 
tial unity  of  European  economic  life  may  not  be 
impaired  by  the  erection  of  artificial  economic  bar- 
riers." 

Here  again  there  is  a  full  recognition  of  the 


46  APPENDIX 

fact  that  peace  is  necessary  to  the  renewal  of 
prosperity,  and  that  the  atmosphere  of  war 
preparations  is  fatal  to  the  growth  of  trade. 
But  neither  the  League  of  Nations  nor  the  Su- 
preme Council,  so  far  as  I  am  aware,  has  made 
any  effective  response  to  these  appeals. 

Fourthly  and  lastly,  I  come  to  the  commis- 
sion on  international  credits.  This  commission 
passed  a  number  of  resolutions,  all  of  which 
were  adopted  unanimously  by  the  conference; 
but  it  will  suffice  to  cite  the  first  two : 

The  conference  recognizes  in  the  first  place  that 
the  difficulties  which  at  present  lie  in  the  way  of  in- 
ternational credit  operations  arise  almost  exclusively 
out  of  the  disturbance  caused  by  the  war,  and  that  the 
normal  working  of  financial  markets  cannot  be  com- 
pletely reestablished  unless  peaceful  relations  are  re- 
stored between  all  peoples  and  the  outstanding  finan- 
cial questions  resulting  from  the  war  are  made  the 
subject  of  a  definite  settlement  which  is  put  into  ex- 
ecution. 

The  conference  is,  moreover,  of  opinion  that  the 
revival  of  credit  requires  as  primary  conditions  the 
restoration  of  order  in  public  finance,  the  cessation 
of  inflation,  the  purging  of  currencies,  and  the  free- 
dom of  commercial  transactions.  The  resolutions  of 


APPENDIX  47 

the  commission  on  international  credits  are  there- 
fore based  on  the  resolutions  of  the  other  commis- 
sions. 

My  argument  then  is  fully  endorsed  by  the 
experts  at  Brussels.  All  the  facts  and  figures 
set  forth  in  the  voluminous  records  of  that  re- 
markable conference  indicate  the  urgency  of 
peace  and  disarmament.  A  year  has  passed. 

The  Brussels  recommendations  have  been 
ignored,  and  conditions  in  Europe  as  regards 
its  currencies,  debts,  trade  and  credit  have  de- 
teriorated. The  Naval  limitations  proposed 
by  Mr.  Hughes  at  Washington,  even  if  they 
are  ratified,  will  give  practically  no  relief  to 
Europe. 


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